The Mystery of Capital

The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else – Hernando de Soto

1. Full Citation

De Soto, H. (2000) The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York: Basic Books.

2. Introduction

The Mystery of Capital explores why capitalism has succeeded in Western countries but struggled in much of the developing world. Hernando de Soto argues that the key to economic development lies in formal property rights and the legal infrastructure that enables individuals to convert assets into capital. The book highlights how lack of formal property systems in many countries inhibits entrepreneurship, investment, and economic growth.

3. Author Background and Credentials

Hernando de Soto is a Peruvian economist and president of the Institute for Liberty and Democracy. He is a leading expert on property rights, informal economies, and development policy, influencing global development agendas.

4. Summary of Contents

Key themes include:

  1. The Role of Property Rights
    • Explains how clear legal ownership facilitates capital formation.
  2. Informal Economies
    • Discusses the challenges faced by those operating outside formal legal systems.
  3. The Dead Capital Problem
    • Assets without legal recognition cannot be leveraged for economic activity.
  4. Legal and Institutional Reform
    • Advocates creating accessible, transparent property systems.
  5. Case Studies
    • Examples from Peru, Egypt, and other countries illustrate challenges and solutions.

5. Critical Evaluation

a. Coherence and Argumentation

De Soto makes a compelling, practical case linking legal systems to economic development.

b. Originality and Intellectual Contribution

The book offers a novel focus on property rights as foundational to capitalism’s success.

c. Evidence, Sources, and Method

Combines field research, case studies, and economic analysis.

d. Style and Accessibility

Written clearly for policymakers, academics, and general readers.

e. Limitations and Critiques

Critics argue the approach underestimates political, social, and cultural factors affecting development.

6. Comparative Context

Compared with:

  • Jeffrey Sachs’s The End of Poverty – Focus on broad development strategies
  • Dambisa Moyo’s Dead Aid – Critiques aid effectiveness, similar focus on institutions
  • Amartya Sen’s Development as Freedom – Broader emphasis on capabilities and freedoms

7. Thematic or Disciplinary Relevance

Relevant to:

  • Development economics and property rights
  • Institutional economics
  • Law and economics
  • Economic policy and reform

8. Reflection or Practical Application

Provides policymakers with insights into legal reforms necessary to unlock economic potential in developing countries.

9. Conclusion

The Mystery of Capital is a significant contribution to development economics, emphasizing the importance of legal infrastructure in fostering capitalism and economic growth.

Recommended for: Economists, development practitioners, policymakers, and students of economic development.

10. Other Works by the Same Author

  • The Other Path (1989)
  • Various reports on property rights and informal economies

11. Similar Books by Other Authors

  • Jeffrey Sachs – The End of Poverty
  • Dambisa Moyo – Dead Aid
  • Amartya Sen – Development as Freedom
  • William Easterly – The White Man’s Burden

12. References (only if external works are cited)

  • De Soto, H. (2000) The Mystery of Capital
  • Sachs, J.D. (2005) The End of Poverty
  • Sen, A. (1999) Development as Freedom
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